At least some banks are losing money
First Goldman Sachs reports earnings of $3.2 billion for the quarter. But then, a few minutes later, Citigroup tells the world that it sort of made a little money but also sort of lost a lot of money (that is, it reported net income of $101 million, but said that, after dividends to preferred shareholders and its exchange of the government's preferred shares for common shares, the income available to common shareholders was, ahem, -3.2 billion).
All this is a timely reminder that the story line I offered up yesterday after JPMorgan reported big earnings—that of Wall Street vs. the rest of us—isn't the only possible narrative for our financial times. What's also happening is that a few of the healthiest Wall Street firms—Goldman and JPMorgan in particular—are eating the lunches of their competitors.
This second phenomenon won't continue forever. At some point the competitive landscape will tilt in new directions, and profits probably will be divvied up in somewhat more even fashion. The question is how big those profits will to be—and how big they ought to be.
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1
I actually, I would think that there are other valid questions. these are questions no one looking at --sy --Indonesia --would think twice about asking. The fact that they need to be asked here is....disconcerting. Still, things are what they are.
1. Are these profits based upon the creation of another huge bubble --e.g. unfunded risks --that the taxpayers will get stuck with?
2. Exactly what value are these institutions providing the general economy? (admittedly tought to answer, but worth considering).
3. How much of their profits are tied to political clout? (Not so tough to answer, but unlikely to BE answered with the MSM in its current sorry state.)
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I would have to say that GS has a leg-up on most of their competition. I mean they're "were" a traditional investment bank and I think they're ability to underwrite shares is key to making their trading profits. Don't get me wrong CITI and many others also have that ability as well, but GS has been doing it far longer. I guess it boils down to who has "perfect information" to those that have "imperfect information."
I think banks should stop trading on behalf of their own accounts. I mean it took less than ten years after the financial modification act and look what happened. They scrambled to dump their share to try to shore up their loan losses and cover their derivative positions. After all they do have this information long before the average "Joe."
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